Over US$1 million paid to CAL last year – McKie

Over US$1 million had to be paid to Caribbean Airlines last year, after flights to the Argyle International Airport (AIA) failed to meet the revenue guarantees outlined in the airline’s contractual arrangement with the local tourism authority.

Cecil McKie, the tourism minister was responding to a question in Parliament on Tuesday when he revealed that the St Vincent and the Grenadines Tourism Authority (SVGTA) paid US$1,059,724 to Caribbean Airlines.

The airline entered into contractual arrangements with St Vincent and the Grenadines (SVG) through the SVGTA for the three year period spanning March 14, 2018 to March 13, 2021. CAL operates weekly (on Wednesdays) all-year-round flights, using an aircraft that has a 104-seat capacity.

McKie said that these flights come from the JFK International Airport in New York.

“St Vincent and the Grenadines provided a revenue guarantee of US$110,380 for return flights by the airline. The revenue guarantee was met for 14 of the 49 round trips operated to date,” he explained.
The revenue guarantee under the contract for flights in the March to December period for 2018 was estimated at US$3,918,490.

The tourism minister said that the airline brought a total of 8412 passengers to St Vincent and the Grenadines in the March to December 2018 period and 8227 passengers departed from this country in that same period.

He further explained that the revenue generated over that period was US$2,858,766, which resulted in the shortfall of over one million United States dollars.

“We made these contractual arrangements with the understanding that the airport would not be up to profitable stage from the beginning. It will take some time …,” McKie said in Parliament on Tuesday.

“These contractual arrangements will be reviewed on an ongoing basis and importantly, we are in discussion with other airlines and the assessment will have to be done in terms of how profitable and how quickly we can have these aircraft operate on a profitable basis.”

Despite having to close that financial gap for Caribbean Airlines, the minister said that flights to the AIA by Air Canada Rouge have been able to meet the revenue guarantee threshold.

He said that the SVGTA entered into contractual arrangements with Air Canada on November 28, 2017 to July 31, 2018. Under these agreements, the revenue guarantee for the winter period was estimated at CA $1,593,723.

“Service provided during that period December 2017 to April 2018 was around 91 per cent capacity and satisfied the revenue guarantee threshold required of the airline. As a result of these favourable performances of the flights, St Vincent and the Grenadines did not incur any expenses to the Airline,” McKie said.

“Air Canada Rouge now provides an all year round flight to St Vincent and the Grenadines on Thursdays. This flight commenced on 25 October 2018. An additional second flight commenced on Sunday 16 December 2018 and will run until 28 April 2019.”

McKie also said that this country was not required to enter into any new contractual arrangements and the airline currently operates these flights independently.

SVGTA has also entered into contractual arrangements with American Airlines (AA), whose first flight landed at the international airport on December 15, 2018.

The airline carries out weekly Saturday flights all-year-round and will run from December 15, 2018 to December 18, 2019.

The tourism minister said that “The three flights operated in December 2018 brought in 375 passengers and took about 365 passengers. St Vincent and the Grenadines established a letter of credit in the amount of US$1 million (EC$2,716,900) with the carrier. A revenue guarantee of US$33,672 for each one way flight is also in place”.

He added that flight submissions will be made by AA on a quarterly basis, but no such submission has yet been made because the first quarter is not complete.